Which? Mortgage Clinic

As a first time buyer, understanding mortgage terminology and knowing what mortgage is right for you can be difficult, so David Blake at Which? Mortgage Advisers has joined up with First Time Buyer to answer your mortgage-related questions

Q Do I have to use my estate agent’s mortgage broker?A No you don’t. Estate agents will often ask you to speak to their mortgage broker/adviser in order to qualify you as a suitable buyer, but this does not mean you have to use the estate agent’s broker to obtain your mortgage. Now, this is not to say that you definitely shouldn’t use the estate agent’s recommended mortgage brokers, but what’s really important is that you understand how your mortgage broker operates and that you are comfortable and confident using them.

Not all mortgage brokers work in the same way. In order to ascertain this, you should find out about a number of things. Ask whether they will be paid a commission for arranging your mortgage and whether they are tied to a specified panel of mortgage providers, as this may limit your options. The answer to these questions should help you to understand the type of company and adviser you are dealing with and, as always, it pays to shop around. The most important aspect to mortgage advice is getting the mortgage that’s right for your individual circumstances. This does not necessarily mean the lowest rate of interest, or cheapest product.

Q Should I buy a newbuild, or second-hand property? What is the difference?A A newly built property, from a mortgage lenders perspective, is generally considered to be a property that has not been occupied before, a property that has been built within the last 24 months, or a newly refurbished property.

The main difference between the mortgage requirements for a newbuild property compared to a second-hand property is the size of deposit required. Generally, lenders will want you to put down a bigger deposit against a newbuild property (especially a flat), often 15%, whereas lots of lenders are comfortable lending to those buying a second-hand property who have a 5% deposit.

The main reason behind the difference in deposit value is based on the differing levels of risk. Newly built properties don’t have a historic value and are quite susceptible to fluctuations in property values. Lenders also think about the risk of developers not being able to sell all of their newbuild properties in one development,
as this would have an impact on the value of the properties already sold.

When buying a newbuild you should consider the timescales involved and the upfront fees. Typically, when buying a newbuild, you will have 28 days to exchange legal contracts binding you to buying the property. Often, you will also have to put down reservation fees to secure the property. The timescale issue is really important, because a mortgage will usually take two to four weeks to arrange, therefore, it is very important that you use a lender who can match your tight timescales.

Some mortgage lenders are much faster at producing mortgage offers than others. Also, when a newly built property is not due to be finished for some time, you may face issues with the length of time for which your formal mortgage offer remains valid. Most mortgage offers are valid for six months, so if there is a delay in the build, or your property will take longer to complete, you may have to reapply for a mortgage. This can be an issue, especially if there has been a change in your circumstances, such as income, outgoings, or credit score. Ideally, you want to obtain a mortgage offer that is valid for the time period you need and probably gives you some grace period if there is a delay in the development.

Q Can I still apply for a mortgage if I have just started a new job?A There are lots of mortgage providers who will lend to you from your first day of being in a permanently employed position. There are actually a couple of lenders that will accept an application from people who are due to start a permanent position within the next three months.

The fact that someone has recently started a new job isn’t a major obstacle in obtaining a mortgage. That said, it is really important to consider whether or not you should apply for a mortgage immediately after starting a new role.

If you have recently started employment, or moved jobs, you need to think about this carefully and ask some tough questions. What happens if you don’t pass your probationary period? Do you have savings in the background to cover this period, if you have to find a new job? Is this new job long term? This is especially important if you are buying relatively close to your work. Is the company you work for stable? The last thing you want to happen is to take out a new mortgage, only to find that you can’t make the repayments. Missing mortgage payments will have a huge impact on your ability to obtain finance in the future.